EURUSD, Silver Outlook: Key Levels for US CPI Week

Key Events

• US CPI (Wednesday)
• FOMC Member Speeches (Tuesday, Thursday, and Friday)
• US Retail Sales and Unemployment Claims (Thursday)
• Geopolitical Developments

Despite the market having already priced in a full rate cut by September, according to the CME Fed Watch tool, the probability rates of a rate cut are being closely monitored for any surprises beyond expectations.

CPI rates are projected to have edged higher in July towards 0.2%, on both a core and monthly level, supporting the Dollar’s latest bullish rebound. In the context of the dual mandate for rate cuts, which includes labor market and growth risks, the latest figures reflected economic resilience.

However, the flattening of the yield curve continues to signal potential recession risks.

Source: CME Fed Watch Tool

Beyond the anticipation of rate cuts, the current debate centers on the magnitude of the cut. There is a 48.5% probability leaning towards a 50-bps cut by September and a 51.5% probability leaning towards a 25-bps rate cut.

A bullish rebound can be anticipated with the VIX on Wednesday following the CPI results, as probability rates are expected to be adjusted accordingly.

Technical Outlook

EURUSD Outlook: EURUSD – Daily Time Frame – Log Scale

Source: Trading view

Bearish pressures continue on the EURUSD chart below the 1.10 barrier with positive US inflation projections and safe haven assets.

Bearish Scenario: breaking below 1.0880, the EURUSD is still expected to meet support levels at 1.08, 1.0740, and 1.0680 respectively.

Bullish Scenario: closing above EURUSD’s consolidation and the 1.1020 barrier, the next resistance is expected to align with the December 2023 high at 1.114.

XAGUSD Outlook: XAGUSD – Daily Time Frame – Log Scale

Source: Tradingview

After dropping below its primary trend and retesting the critical 26 support-zone, silver is now retesting the lower border of its primary channel at the 28-resistance zone.

Bullish Scenario: a close above the 28.20 level can lead the track towards levels 29.20, 30.50, and 33 respectively.

Bearish Scenario: a support zone can be expected below 26.40 between levels 26, and 25.20 respectively.

--- Written by Razan Hilal, CMT – on X: @Rh_waves